Peru's Congress boosts state energy firm in populist turn

Reuters Staff

3 Min Read

LIMA, Sept 3 (Reuters) - Lawmakers in Peru reversed course on state-owned Petroperu’s role in upstream businesses and voted on Thursday to remove a legal barrier that kept it from taking control of the country’s biggest oil block.

The populist turn comes as Petroperu supporters in the Amazonian city of Iquitos continued protests against the government’s recent decision to grant Pacific Exploration and Production Corp a two-year service contract to keep oil flowing from block 192 after a 30-year concession failed to draw any bids in an auction last month.

The bill’s success, a week after a similar measure failed to garner support, is the strongest sign yet of the tide of nationalist and left-leaning posturing that tends to precede presidential elections in Peru.

Peruvians will vote on a successor to President Ollanta Humala in April 2016.

The bill that passed 71-10 in Peru’s single-chamber Congress late on Thursday does not in itself alter Pacific’s contract.

Instead, it modifies a law that Humala had interpreted as barring Petroperu from investing in upstream activities to make an exception for block 192. That law also sailed through Congress in 2013.

Humala is expected to veto the new measure - his energy minister called the legislation “unconstitutional” - but Congress could push it past him in a second vote.

Petroperu has not produced oil in more than 20 years and mainly refines, stores and commercializes oil products.

Daily output from block 192 in the Amazonian region of Loreto is now about 12,000 barrels, a level Pacific has said it could ramp up.

But slumping crude prices and disputes with indigenous communities have sapped interest in it, leaving Peru scrambling to broker a last-minute deal with a new operator before the expiration of the previous contract on Saturday.

Some lawmakers called for probes into potential wrongdoing in how the energy regulator transferred operations of the block to Pacific.

Humala has defended the contract, which he approved via presidential decree on Saturday, as the best option for Peru given weak oil prices and has said Petroperu was legally-bound to focusing on its $3.5 billion refinery expansion.

Likely presidential candidate Keiko Fujimori, far ahead of rivals in preliminary polls, was one of the first politicians to say Humala should have awarded block 192 to Petroperu. Similar statements from other politicians, including members of Humala’s party, followed.